pirates of somalia: ending the threat, rebuilding a nation
so i've been part of the reading the mentioned report and it is pretty interesting/kind of funny. here's a lil snippet:
The parameters adopted predict that an average payment of US$10,478 is offered to each member of a successful attack team. Since the contract generally offered by piracy enterprises is one in which pirates and guards are paid after successful conclusion of the ransom negotiation (Hansen 2009; SEMG 2010), the apparently large number reflects the low probability of payment... Furthermore, the first pirate to board a vessel is entitled to a larger share of the ransom or a bonus, usually in the form of a sports utility vehicle (SUV; SEMG 2008). This arrangement is consistent with the proposed model because the first man climbing the ladder faces disproportionate risks if the crew decides to defend the ship. A bonus of US$45,000 (the cost of an SUV) corresponds to a premium associated with an increased risk of death of 37 percent (see Annex 7.B).
Using the parameters adopted earlier, the analysis assumes that all capital is lost when the entire crew is lost at sea, for which there is a 5 percent probability; there is a 15 percent probability the pirates will bring back a ship and the financiers earn a return; and there is thus an 80 percent probability the pirates will return empty-handed. In the last case, it is assumed that investors on average lose half their capital.
The annualized return on start-up capital should be at least the equivalent of 427 percent if an attack is successful. On the assumptions given, a risk-averse financier will be willing to invest a small proportion of his total assets into equipping a piracy mission for a return of this magnitude (see Annex 7.C). Accounts of actual returns to investors vary widely because they are not paid a fixed return but a proportion of the ransom. SEMG (2011) reports that investors get 30 percent of the ransom after all costs have been covered and that generally the majority of the ransom is taken up by costs (including bribes, provisions, wages of cooks and accountants, and logistics support). Somalia Report (2011) gives 15 percent of the final ransom as going to investors, which is consistent with SEMG (2011) if half the total ransom is taken up by costs. In Table 7.2 the total capital cost of a pirate operation is shown to be about US$400,000; with a 15 percent share investors would get the market return if the total ransom is US$2.6 million. Since 15 percent of the 2011/2012 average ransom of US$4.9 million would be US$735,000, on average investors would get more than the market return on their capital. However, the contributions of lead investors go beyond the financial resources they provide; their social and political connections will help make an operation feasible, and this political capital will be rewarded appropriately, possibly showing up in higher rates of returns on their financial contributions.
This is interesting. I still can't get over the fact that pirates still exist, but I am always a little surprised at how prevalent they are in those waters.
Yeah, 201 maritime attacks happened in 2018, up from 22 year low of 180 in 2017. Most of them used to happen in Somalia but now the most happen in Nigeria (48 in 2018)
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